Digital Payment
The information era is characterized by instant access to information and markets, and increased availability of smartphones that have seen consumers shift from brick and motor stores to online shopping and cash to cashless transactions. Digital payment is one of the recent development that has gained tremendous acceptance in the financial sector. There are various forms of digital payments that people use across the globe. Despite the convenience of digital payment methods, it attracts various risks such as theft and cybercrimes. However, technology developers are continually developing solutions to secure digital payment, and the success of the technology relies on various factors such as investments in necessary infrastructure, organizational policies, and change in consumer tastes and preferences. Digital payment is likely to dominate the financial sector since consumers are in pursuit of convenience and flexibility besides the wide adoption of mobile phones and access to the internet.
New Modes of Payment
Apart from the traditional cards, internet banking, bank transfers, and e-wallets new digital payment methods have emerged and are gaining strength. Such include the use of mobile phones, mobile app money transfers, social media payments, and cryptocurrency. A significant number of consumers have embraced mobile payment platforms among them Google Pay, Pay Pal, Apple Pal, Samsung Pal, and Western Union (). Each of the above payment platforms strives to meet consumer needs through competitive services.
Digital marketing and instant access to information have promoted the adoption of digital payment methods in various ways. According to Tiewul (2020), digital marketing allows consumers to navigate geophysical barriers allowing them to shop from across the globe conveniently. Besides, increased digital payment methods have influenced online marketing and consequently reduced the interest of holding paper or coin money. Consumers have widely accepted digital payment methods to enjoy numerous benefits of digital marketing such as a wide range of goods and services, competitive prices, availability of a wide range of payment options, detailed charge information, and the availability of return of purchase option and guaranteed refund (). Consumer satisfaction and access to customer reviews about the various payment methods also promoted trust among digital payment users. However, electronic money transfer methods encounter trust issues since they are prone to cybersecurity threats, thus mandating financial institutions and digital money transfer service providers to upgrade their technologies and curb such threats constantly. Technological trust is a major factor affecting the adoption of digital payment methods. Szumsk (2020), carried out a research study to establish the effect of technological trust on digital payments among students of the Faculty of Management of Warsaw University. The study established that maturity and transparency of a payment method enhance consumer trust, whereby, mobile blockchain-based technology has limited technology trust in comparison to established digital payment methods. The little trust emanated from a limited understanding of the technology drivers, and its limited use. Moreover, the security of the digital payment method is paramount to the user.
The availability of various systems that promote the use of digital payments also encourages their adoption. For instance, the online store value in Indonesia allows consumers to execute instant online transactions to merchants and other individuals. PayPal’s Peer to peer system allows transactions between individuals within the same entity (). Similarly, a digital accumulation system allows consumers to purchase goods and services from various online platforms, accumulates their expenditure and bills it at the end of the month. Digital accumulating balance is suitable for small value transactions such as the purchase of ringtones, games, and articles. Telecommunication companies have adopted digital accumulation systems such as Bill-me later. Digital checking payment systems also encourage the use of digital payment systems. It entails the development of an existing check account to pay for online shopping such as Pay by Check. The systems validate payment details from customers and provide electronic checks to the merchants as a medium of exchange.
Countries differ on their level of adopting digital payment methods based on the different factors that influence their use within the specific states. In the USA, the adoption of digital payments has been on the rise similar to other countries such as India and Indonesia. However, consumer preference and factors influencing digital payments differ across the globe.
Current trends in the digital payment methods
Digital payment methods are continually gaining popularity across the globe. Businesses are gradually shifting from cash and credit card transactions to adopt digital payments. In 2019, the segment registered transaction value of US$ 3,856 billion across the globe, with China as the dominant market player with a transaction value of US$ 1,596(). Mobile payments are the most popular method, and consumers use it to make online and in-store purchases, pay bills, send and receive money. In 2018, there were an estimated 440 million users of mobile contactless payment worldwide, and the number is expected to rise to 760 million in 2020(). However, the United States exhibited a unique trend in digital payment in 2019, credit cards were the most popular payment method at 39%, followed by Debit cards 34%, cash and mobile wallet followed at 15% and 6%, respectively, while charge card and debit card were the least used modes of payment at 4% and 2% correspondingly (Rudden, 2020). The uniqueness of digital payment trends in the USA is attributable to the already established electronic financial transaction before the advent of mobile money transfers unlike in the emerging economies where the use of electronic money transfers such as credit cards was uncommon, until recently.
In India, an emerging economy digital payments have experienced exponential growth in the recent past. The Indian government has promoted the adoption of cashless transactions after the demonetization of high-value currency, which resulted in a271% growth in digital payment for a total value of US$2.8 billion in 2016. The exemplary growth is attributable to efforts from the government and the private sector to provide infrastructural and policy support.
Various factors promote the wide adoption of digital payment in India; penetration of the internet, facilitation of digital payment from non- financial institutions, single touch payment, and government support on cashless transactions through incentives. Moreover, organizations are acquiring infrastructure to support digital payments, such as providing fast internet in remote areas. In contrast, others provide incentives such as cashback or no transaction charge up to a specific limit to facilitate the growth of digital transactions. There are several digital payment methods in India namely, mobile wallets, prepaid credit cards, Debit cards, The Aadhaar Enabled Payment System(AEPS), Unstructured Supplementary Service Data based mobile banking(USSD), and The United Payments Interface (UPI). The various modes of payment act as either complementary or competitors in pursuit of exceptional services to consumers
Digital payment methods offer numerous benefits to consumers besides convenience. For instance, e-wallet saves time since consumers can accomplish their transactions without providing card details, it is easy to use, it is convenient with all information under one roof, and often provides attractive discounts. Such benefits attract consumers to adopt digital payment methods across the globe. The above factors concur with Sfenrianto () findings on the factors influencing the adoption of E-pay in Indonesia. According to the study security, culture, performance expectations, and social influence were primary factors influencing the use of digital payment.
Digital payments have attracted immense interest from different players in the financial sector. Various organizations have established unique modes of digital payments to provide competitive money transfer and payment options. Diverse factors influence the adoption rate of electronic payments such as perceived security, culture, expected satisfaction, and social influence. The modes of payment offer convenience while resolving geographical barriers to allow consumers to shop online from across the globe. The mobile phone money transfer is the most dominant mode of digital payment in various countries other than the United States, where credit transfer in on the lead. China leads in the total value of Digital money transfer, attributable to its surplus balance of trade emanating from high exports to different countries across the globe. Moreover, the existence of various systems promotes the adoption of electronic money transfers, such as the digital accumulation system. Financial institutions and other market players should invest in digital payment infrastructure to promote its acceptance, and resolves the challenges that cash transactions present to the business sector.
References
Rudden, J. (2020, October 05). Most popular POS payment methods in the U.S. in 2019. Retrieved October 09, 2020, from https://www.statista.com/statistics/568523/preferred-payment-methods-usa
Clement, J. (2020, August 12). Topic: Mobile payments in the United States. Retrieved October 09, 2020, from https://www.statista.com/topics/982/mobile-payments/